Trump

[erfalf]

Man born with nothing and works his butt off as a crane operator, making $100,000 a year busting his butt, following the pipeline, and getting damn good as his job. He does this for 40 years making $4,000,000.  Income tax plus FICA, lets call it 40% to keep it simple.  The worker pays $1.6 million in taxes in his lifetime.

Man is born to a wealthy family who holds investments. When he turns 18 he is gifted some of the holdings and lets other people run them for him. They generate $250,000 in annual distributions for him, because he was born into the right family. Over 40 years he makes $10,000,000. He pays capital gains tax of 15% on his income. The wealthy man makes 150% more not working, and pays $1.5 Million in taxes in his lifetime. If anyone is keeping score, he pays less in tax than the working man.

But wait, there's more!

The worker retires at 60. Part of the $2.4 million he took home during his lifetime has been saved so he can have a modest and comfortable retirement.  His income in retirement is a percentage of whatever he managed to save. What he doesn't spend on retirement, he can pass on to his kids.

The man born into the right family never stops earning his $250k a year and can continue to build wealth and live as he pleases. When he dies, he passes the family assets onto his kids, who very likely have no inheritance tax to pay so they also don't really have to work if they choose not to. They will pay less in taxes than the children of the working man.


Hard to argue that the 15% Capital Gains tax is somehow oppressive.

It's rewarding risky behavior that the economy needs. While I agree it appears unfair, I can't help but think that every argument against this sounds like a huge case of penis envy. Something my lefty professors in college claimed needed to be justified. It seems the tax code was just a bludgeon to right the wrongs of the wrong people having wealth or something like that from what I could tell.

Personally, who do I care is born in to what family. Obsessing over that will get you nowhere in life.

[heironymouspasparagus]

It's rewarding risky behavior that the economy needs. While I agree it appears unfair, I can't help but think that every argument against this sounds like a huge case of penis envy. Something my lefty professors in college claimed needed to be justified. It seems the tax code was just a bludgeon to right the wrongs of the wrong people having wealth or something like that from what I could tell.

Personally, who do I care is born in to what family. Obsessing over that will get you nowhere in life.

You should care.  Because being born into a particular family does matter and it directly affects you and many of the financial things that go on in this country - adversely for the vast majority of us!  I have listened to the Murdoch/Breitbart Clown Show for many years, and one recurring theme they harp about is people feeling entitled to something they made no contribution to.   They are projecting of course, trying to get you to think that somehow a minimum wage worker using food stamps is the problem.

It's a misdirection technique used by magicians everywhere - get you to focus on some trivial item, while the real "shell game" goes on where you won't notice.  Like inheritance of massive fortunes by people who contributed nothing to the effort, but still get the benefit of all that money being concentrated in the family.  Pick a large, rich family.  Let's start with Trump....he was born into huge wealth.  And even though he made no contribution to it, he got the benefit of a very large portion of it.  Because he is "entitled".  As we have seen in particular this last week - he is "entitled" to be as narcissistic and more than one could imagine.  No consequences yet - he isn't in prison for sex crimes.

Paris Hilton is the light and fluffy version of this.  Silly goofball who has little or no redeeming social value, but enjoys having a great trust fund!

Kardashians are just gross, but also a high visibility of it.

[AquaMan]

Something my lefty professors in college claimed needed to be justified.

This quote says everything about your education or how you approached it and how it manifests itself now. You didn't enter the classroom with a blank slate. You went looking for ammunition and reinforcement of your existing beliefs. I don't remember making those judgments of professors during that period of time. I assumed they knew more than me or they wouldn't be the professor and me the student.

But I do remember sitting next to someone in Economics class who when presented with a description of how the different systems worked and what their advantages/disadvantages were, suddenly stood up and yelled out, "You're teaching Communism! My parents warned me!" and walked out of class.

Was that you?

[AquaMan]

You should care.  Because being born into a particular family does matter and it directly affects you and many of the financial things that go on in this country - adversely for the vast majority of us!  I have listened to the Murdoch/Breitbart Clown Show for many years, and one recurring theme they harp about is people feeling entitled to something they made no contribution to.   They are projecting of course, trying to get you to think that somehow a minimum wage worker using food stamps is the problem.

It's a misdirection technique used by magicians everywhere - get you to focus on some trivial item, while the real "shell game" goes on where you won't notice.  Like inheritance of massive fortunes by people who contributed nothing to the effort, but still get the benefit of all that money being concentrated in the family.  Pick a large, rich family.  Let's start with Trump....he was born into huge wealth.  And even though he made no contribution to it, he got the benefit of a very large portion of it.  Because he is "entitled".  As we have seen in particular this last week - he is "entitled" to be as narcissistic and more than one could imagine.  No consequences yet - he isn't in prison for sex crimes.

Paris Hilton is the light and fluffy version of this.  Silly goofball who has little or no redeeming social value, but enjoys having a great trust fund!

Kardashians are just gross, but also a high visibility of it.

The tax code is used for the most part as a tool to benefit that class under the guise of encouraging investment and economic growth. As long as you can call it "death tax" or "entitlements reform" etc. you can pass off the amazing growth of the top % of wealth as having been earned. I don't resent the wealthy for taking advantage of the system. I blame a Congress that funds its re-election through exploiting that tax code system for donations.
It will eventually play out when it causes another recession of 2007 magnitude and someone like Trump is in office to fuel the ensuing chaos.

[erfalf]

This quote says everything about your education or how you approached it and how it manifests itself now. You didn't enter the classroom with a blank slate. You went looking for ammunition and reinforcement of your existing beliefs. I don't remember making those judgments of professors during that period of time. I assumed they knew more than me or they wouldn't be the professor and me the student.

But I do remember sitting next to someone in Economics class who when presented with a description of how the different systems worked and what their advantages/disadvantages were, suddenly stood up and yelled out, "You're teaching Communism! My parents warned me!" and walked out of class.

Was that you?

Reflection on my time there is what brought me to this conclusion. I was a buyer initially. But it's bunk. They weren't all that way. Most of my business professor's regardless of their left leaning feelings, were straight shooters and didn't get into class warfare mumbo jumbo. They did what they were supposed to and taught finance. It's just the liberal arts studies teachers that seem to be more prone to let it "slip in".

The fact that you can jump to that conclusion says everything about how you view people who don't agree with you.

[erfalf]

When someone can tell me how much is "enough" then this will be a serious conversation. But it is still hovering around the wealth envy, we must punish them area for me.

Yes the tax code is written by people, to benefit those same people. What do you expect when the code is thousands of pages long? Simplify and remove all the variables. But that's unfair too isn't it? Unfair to tax accountants that's for sure. 

[cannon_fodder]

Red Arrow:

Your math is correct and your point well taken, but...

At $250k the cap gains on long term would be 15%.  In that I specified $250k and inherited family wealth, that'd be the number. It isn't short term and it isn't over the 15% threshold.

For the worker, the rate is actually 10% up to 9k, 15% up to 37, etc. etc. up to 28% on the top of his bracket. FICA is 6.2% for the employer and 6.2% for the employee, plus Medicare 1.45% for each.  So if the guy is 1099 on the job, his rate would be higher than 40%. If a W2 employee, it would be less.

And yes, he would be entitled to deductions. They both would. I didn't factor that in because it complicates the calculation beyond a simple example and could go either direction. The rich guy could have a family trust that offsets ALL of his gains with tax loopholes before distributing profits. His estate could be held by a family trust. Who knows...

The point still went unaddressed. To wit: the guy that actually worked pays way more in taxes than the guy that doesn't have to work. The guy that starts his own business and is trying to grow it likely pays income tax and self employment tax, he's taxed the highest.  The guy who works pays the second highest. The guy who doesn't have to work pays the least taxes on his income. The math is merely an illustration of that point.

- - -

Erfalf:

Taxes have been a fact of civilization for 5,000 years. Tax policy simply adjust who pays and encourages/discourages behavior.  It isn't a form of punishment, and if you want to continue to argue that it is then I have to ask whwy the governmentn is punishing people for actually working?  Am I envious that some people are born into unfathomable wealth and will never have to work in their lives, their children's lives, etc.?  Sure. Just like people were envious in ancient Greece and of Roman Patrocians and of the king and... that's just a fact of life. I'm also jealous that pitchers can throw 100 mile per hour fastballs...but that jealously isn't guiding my discussion on changing the distance from the plate to the pitchers mound. And being envious of the wealth of others isn't driving this discussion either.

On point...

What risky behavior is capital gains rewarding? Inheriting an established company and continuing to operate it isn't risky at all. Owning utility stocks isn't risky. The Walton family inherited a wildly successful business and made billions from being born into the right family. Some other guy went to Nigeria to work in the oil fields, climbed onto a fishing boat, or just delivered pizzas... which is more risky? They could easily lose their jobs and be hung out to dry, let alone physical injury or death. Starting your own company is far more risky, but many times will generate  K1/self employment income. Certainly capital gains can be derived from a risky endeavor, but it isn't inherently so.

It can also be derived from a good and necessary element of an economy. Loans. Venture capital. IPOs. Fixing up real estate and flipping it. Starting a new business - these activities actually generate wealth. But most of the capital gains are not from activities that directly drive the economy - secondary stock markets (when you buy a share of John Deere stock, you aren't really capitalizing any company so it can hire new people or build a new plant), family trusts, hedge funds, derivatives, credit default swaps, etc. They certainly serve an economic purpose, but in most instances more economic growth would occur if the wealth was directed elsewhere.

That's not to say secondary markets and other economic activity should be curtailed or punished. Obviously secondary stock markets are needed to drive the primary market (why buy an IPO if I cannot resell it?). They almost all have a legitimate purpose. But it seems foolish to encourage all those forms to the same extent as if credit default swaps are somehow more beneficial than skilled labor.

More importantly, hard work is also important to the economy. The guy with $1mil to invest in AEP is certainly someone you want to participate in the economy. But so is the guy who climbs a pole every day and keeps the plant delivering power. Our current system says the guy with $1mil needs to be encouraged to participate and the guy who climbs the pole should be discouraged from participating.

That doesn't make sense. (FWIW: penis envy refers to a young woman feeling inferior simply because she isn't a man).  


- - - -

DavidEinstien:

Short term trading is horrible for a stable market. It vastly favors robotic  transactions, disrupts long term savings, and has almost no benefit to the actual economy.

[AquaMan]

Reflection on my time there is what brought me to this conclusion. I was a buyer initially. But it's bunk. They weren't all that way. Most of my business professor's regardless of their left leaning feelings, were straight shooters and didn't get into class warfare mumbo jumbo. They did what they were supposed to and taught finance. It's just the liberal arts studies teachers that seem to be more prone to let it "slip in".

The fact that you can jump to that conclusion says everything about how you view people who don't agree with you.

Sticks and stones. I never had a liberal or conservative professor and I would never group liberals as coming from Liberal Arts Studies, since that doesn't have anything to do with political Liberals. If what you are saying is that you retroactively are classifying your professors then, once again, enlightening. They taught you bunk and it took years to find out. So is your supposition that they should just teach finance, as a tactics, rather than finance as a subject that encompasses history, reality, fairness, integrity, future trends, improvements etc. That attitude is what is screwing our pooch right now.

You provided the info, I just analyzed it. No jumping necessary.

[swake]

Here’s another shoe drop.

Donald Trump as Pedophile Peeping Tom in Chief.

Here is what he said he did on The Howard Stern Show:

Trump: “I’ll go backstage before a show and everyone’s getting dressed and ready and everything else. And you know, no men are anywhere. And I’m allowed to go in because I’m the owner of the pageant. And therefore, I’m inspecting it. You know I’m inspecting it. I want to make sure everything is good.”
Stern: “You’re like a doctor.”
Trump: “Is everyone OK? You know they’re standing there with no clothes. Is everybody OK? And you see these incredible looking women. And so I sort of get away with things like that.”

But it turns out while that was true, it wasn’t just the Miss Universe Pageant he pulled this sick move on. He also did it with his related Miss Teen USA Pageant on girls as young as 15 years old:

Separately, BuzzFeed News reported Wednesday that four women in the 1997 Miss Teen USA beauty pageant said Trump walked into their dressing room while they were changing. Some were as young as 15, BuzzFeed reported.
Three spoke anonymously, and one allowed her name to be used. “I remember putting on my dress really quick because I was like, ‘Oh my god, there’s a man in here,'” Mariah Billado, a former Miss Vermont Teen USA, told BuzzFeed.
Trump, she told BuzzFeed News, said “something like ‘Don’t worry, ladies, I’ve seen it all before.'”

http://losangeles.cbslocal.com/2016/10/11/former-beauty-queen-she-other-contestants-were-forced-to-greet-trump-even-when-not-fully-dressed/

https://www.washingtonpost.com/news/morning-mix/wp/2016/10/12/former-miss-arizona-trump-just-came-strolling-right-in-on-naked-contestants/

[erfalf]

Sticks and stones. I never had a liberal or conservative professor and I would never group liberals as coming from Liberal Arts Studies, since that doesn't have anything to do with political Liberals. If what you are saying is that you retroactively are classifying your professors then, once again, enlightening. They taught you bunk and it took years to find out. So is your supposition that they should just teach finance, as a tactics, rather than finance as a subject that encompasses history, reality, fairness, integrity, future trends, improvements etc. That attitude is what is screwing our pooch right now.

You provided the info, I just analyzed it. No jumping necessary.

I just want them to teach it without using it as a tool to bash individuals (politicians). That's what I want. Context is everything. And that's what they do teach. But without the blue glasses.

[erfalf]

Erfalf:

Taxes have been a fact of civilization for 5,000 years. Tax policy simply adjust who pays and encourages/discourages behavior.  It isn't a form of punishment, and if you want to continue to argue that it is then I have to ask whwy the governmentn is punishing people for actually working?  Am I envious that some people are born into unfathomable wealth and will never have to work in their lives, their children's lives, etc.?  Sure. Just like people were envious in ancient Greece and of Roman Patrocians and of the king and... that's just a fact of life. I'm also jealous that pitchers can throw 100 mile per hour fastballs...but that jealously isn't guiding my discussion on changing the distance from the plate to the pitchers mound. And being envious of the wealth of others isn't driving this discussion either.

On point...

What risky behavior is capital gains rewarding? Inheriting an established company and continuing to operate it isn't risky at all. Owning utility stocks isn't risky. The Walton family inherited a wildly successful business and made billions from being born into the right family. Some other guy went to Nigeria to work in the oil fields, climbed onto a fishing boat, or just delivered pizzas... which is more risky? They could easily lose their jobs and be hung out to dry, let alone physical injury or death. Starting your own company is far more risky, but many times will generate  K1/self employment income. Certainly capital gains can be derived from a risky endeavor, but it isn't inherently so.

It can also be derived from a good and necessary element of an economy. Loans. Venture capital. IPOs. Fixing up real estate and flipping it. Starting a new business - these activities actually generate wealth. But most of the capital gains are not from activities that directly drive the economy - secondary stock markets (when you buy a share of John Deere stock, you aren't really capitalizing any company so it can hire new people or build a new plant), family trusts, hedge funds, derivatives, credit default swaps, etc. They certainly serve an economic purpose, but in most instances more economic growth would occur if the wealth was directed elsewhere.

That's not to say secondary markets and other economic activity should be curtailed or punished. Obviously secondary stock markets are needed to drive the primary market (why buy an IPO if I cannot resell it?). They almost all have a legitimate purpose. But it seems foolish to encourage all those forms to the same extent as if credit default swaps are somehow more beneficial than skilled labor.

More importantly, hard work is also important to the economy. The guy with $1mil to invest in AEP is certainly someone you want to participate in the economy. But so is the guy who climbs a pole every day and keeps the plant delivering power. Our current system says the guy with $1mil needs to be encouraged to participate and the guy who climbs the pole should be discouraged from participating.

That doesn't make sense. (FWIW: penis envy refers to a young woman feeling inferior simply because she isn't a man).  

VERY Broadly speeking the risk is loosing your investment. That is a very real risk in each and every investment ever made, EVER!

You are conflating investment with inheritance. The two are NOT linked outside the fact that inherited wealth can be invested. It can also be hid under a mattress, or spent on chocolate bars. Ain't free markets great?

Starting a company is more risky, but in many cases impossible without investors. Which would you rather have.

[heironymouspasparagus]

Here’s another shoe drop.

Donald Trump as Pedophile Peeping Tom in Chief.

Here is what he said he did on The Howard Stern Show:
But it turns out while that was true, it wasn’t just the Miss Universe Pageant he pulled this sick move on. He also did it with his related Miss Teen USA Pageant on girls as young as 15 years old:
http://losangeles.cbslocal.com/2016/10/11/former-beauty-queen-she-other-contestants-were-forced-to-greet-trump-even-when-not-fully-dressed/

https://www.washingtonpost.com/news/morning-mix/wp/2016/10/12/former-miss-arizona-trump-just-came-strolling-right-in-on-naked-contestants/

Make America Great Again!!

[heironymouspasparagus]

You are conflating investment with inheritance. The two are NOT linked outside the fact that inherited wealth can be invested. It can also be hid under a mattress, or spent on chocolate bars. Ain't free markets great?

Free markets WOULD be great!!!   If they ever existed.   What we have is NOT free markets - we have Capitalistic Monopolism - not the same at all.

[erfalf]

Free markets WOULD be great!!!   If they ever existed.   What we have is NOT free markets - we have Capitalistic Monopolism - not the same at all.

Weren't you advocating for that earlier though?

And I will acquiesce and rephrase. Free will is great isn't it. That's still true (well, mostly  )

[AquaMan]

I just want them to teach it without using it as a tool to bash individuals (politicians). That's what I want. Context is everything. And that's what they do teach. But without the blue glasses.

Seems like you learned something by their failure to teach you as you perceived they should.

If you go to Metro Christian University, wouldn't you expect that their might be some Christian politicking going on in that institution? ORU? Texas Christian? When you have a professor who came from an ivy league background you could expect that there may be some progressive thinking going on and taught. Yet you came out ok. You saw it, you learned another perspective and now you don't want others to have that privilege. Your conservative beliefs remained intact and you became employed.

Of course now, you assert it was all bunk. I don't think so.